Overtime, Bonuses and Commission Income: Questions for Your Manufactured Home Lender
Base pay is read from your pay stub. Overtime, bonuses, commission, shift differentials and tips are read from a history, because the lender’s question is not what you were paid last month but what you can be expected to earn every month for the life of the loan. Gathering that history before you apply, and asking how your program counts each kind of pay, is what lets a variable-income file be reviewed once rather than three times.
This article is for employed buyers whose pay varies. If you own a business or work for yourself, your income is read from tax returns, which is covered in self-employed income.
Base pay and variable pay are read differently
Your base pay is a rate times hours, and a current pay stub shows it. Everything else on the stub varies, so the lender looks back over a period to see whether it is regular, how much it has averaged, and whether it is rising, steady or falling. Programs differ on the period and on how a change is treated, which is why the questions below belong in your first conversation.
Types of pay and the records that show each
| Pay type | What shows it | What the reviewer is deciding |
|---|---|---|
| Hourly or salaried base pay | Recent pay stubs with year-to-date totals | The current rate and that it continues |
| Overtime | Pay stubs with year-to-date overtime, prior years’ wage statements | Whether it is regular enough to count, and at what average |
| Bonus | Pay stubs, prior years’ wage statements, the employer’s bonus terms | Whether it recurs and whether the employer expects it to |
| Commission | Pay stubs, wage statements, and tax returns if you deduct expenses | The pattern over time, and expenses that reduce the net figure |
| Shift differential or hazard pay | Pay stubs showing it separately | Whether your schedule makes it steady |
| Tips | Wage statements showing reported tips, pay stubs | Only reported tips can be counted |
| Second job | Pay stubs and wage statements from the second employer | How long you have held it and whether it continues |
Keep the year-end wage statements for the years your program asks about, because they are what tie the pay stubs together into a history. The general list of what every applicant gathers is in what to gather before you apply.
Questions to ask before you rely on variable pay
The answers decide what your budget is built on. If your overtime is counted at a lower figure than you earn, or not counted, better to know before you choose a home than after an offer is accepted.
What the lender asks your employer
Lenders generally verify employment directly: your position, your start date, your base pay and, for variable pay, whether the arrangement is expected to continue. Tell your payroll or human resources office that a request may arrive, and ask whether your employer will confirm the outlook for overtime or bonuses in writing if asked.
If your pay changed recently
Three situations are worth raising unprompted.
- A new job with the same employer type and pay structure. Bring the offer letter and your first pay stubs. The history from the old job may carry over; ask.
- A move from hourly to commission, or the reverse. The pay type changed, so the history may start again. Say so early.
- A year that was unusually high or low. Explain the reason, whether it is temporary, and what your employer expects. A reviewer reads an unexplained drop as a trend.
The same rule applies after you apply: a change in how you are paid, or leaving a second job, belongs in a message to your specialist before it happens. Changing jobs or taking on new debt lists what to report during processing. Credit requirements and income rules vary by program and investor, and all financing is subject to credit approval.
